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eBay™ is a wonderful place to find interesting items at prices you can afford. It should also be an incredibly fun place to visit. Unfortunately, if you don't completely understand the way the bidding process works, things can often get a bit frustrating. The purpose of this little tutorial is to help you understand that bidding process and, in the process, have as much fun as possible.

Bidding at eBay™ is done using something called a "proxy system" [sometimes jokingly referred to as "the eBay™ elf"]. Basically, all this means is that you tell eBay™ the most you are willing to pay for an item [your "maximum bid "], and then eBay™ automatically places your bids for you. In a "real" auction, complete with a live auctioneer and a crowded room of interested bidders, each bidder must constantly place new bids each time they are outbid by someone else. This works fine when all the bidders are together in the same room, but it's just impossible when bidders are spread all across the world in different time zones.

With the proxy bidding system, all you have to do is enter your maximum bid -- the most you would ever be willing to pay for an item. Bidding is done in automatic increments which increase as the current price increases - usually in the range of one or two dollars. Let's say the minimum bid on an item is $50 and you enter a maximum bid of $100. If there are no other current bidders on the item, the proxy system will enter your bid at $50. If somebody later comes along and bids $75, the proxy system will automatically increase your bid to $76 [the current bid plus the required minimum increment] and will tell that other bidder that they have been outbid. If more people place bids, the proxy system will continue to place bids for you until the bid amount reaches your stated maximum [in this case, $100].

Remember, though, that other bidders also have maximum bids! If you enter a maximum bid that is less than somebody else's, you will be the one who will be told "you have been outbid"!

It's also important to remember that the "minimim bid increment" only applies to the current high bid and has nothing to do with your hidden "proxy" or maximum bid. For example, let's say you have placed a maximum bid of $125 on an item, but the current high bid is only at $50. The minimum bid increment of $1.00 simply means that another bidder has to bid at least $51 to place a valid bid. But what happens if that bidder decided to place a bid of $125.01? Well, since his maximum bid is higher than your maximum bid, the other bidder would win by a penny. His maximum bid doesn't have to be the minimum bid increment over your maximum bid -- it only has to be the minimum bid increment over the current high bid showing. This happens all the time, and is one of the reasons I recommend that you NEVER bid easy to guess round numbers like $125. If you think an item is worth $125, bid something like $126.59 instead. That makes it harder to guess, and you are less likely to be outbid by a penny.

What Is a Sniper? The single biggest mistake that new users make is to place a maximum bid just barely high enough to become the high bid, but no higher. They would be willing to go higher if necessary, but they figure, why bother? If somebody outbids them, they can always just increase their bid, right?

Believe it or not, there are bidders out there who know this is how you think! Well, not you in particular [don't get paranoid], but they know that many bidders don't really bid their "maximum" amount up front, and they take advantage of this fact by waiting until literally the last second before making their bid. These bidders are affectionately referred to as "snipers," and they know that if they give other users the opportunity to outbid them, that's exactly what other bidders [just like you!] will do. Unlike a "real" auction, where the auctioneer has to start saying "going, going, gone" anytime a new bid is placed, eBay auctions have a fixed ending time and when the auction is over, it is over, even if a bid is placed one second before the end. Snipers use this fact to their advantage and count down the seconds to place their bid as close to the ending time as possible. Sometimes it's less than one minute before the end. Sometimes it's less than ten seconds! There's nothing illegal about bidding this way, and most snipers don't do it to be malicious -- they simply know how many users bid and take advantage of that knowledge to get the best deal possible. But it can nevertheless be extremely frustrating and disheartening to think that you have won an item, only to see it "snatched" away with no time left to respond.

What Can I Do About Snipers? There are three basic strategies for dealing with snipers. First [and this seems to be the most popular for some reason], you can simply complain about it. Unfortunately, while this may make you feel better, it really doesn't help. Second, you can try and become a sniper yourself. This is great for people that have the time to watch an auction down to the last second and who love the adrenaline rush of trying to enter a bid at the last possible moment. Unfortunately, not everybody has the time or the temperament for this, and many snipers have lost out on an item when their computer or Internet Provider [or eBay™, for that matter] crashed at an inopportune moment. Plus, sniping will make eBay™ less fun for everybody else, and unless you really feel the need to win at any cost, the old "Golden Rule" applies as much to eBay™ as it does to every other aspect of life.

The third way to deal with snipers, and the way I personally recommend, is to simply let the eBay™ proxy system work for you. When you see an item you are interested in, think long and hard about how much you really would be willing to pay for that item. Not how much you hope to pay for it, but how much you would pay for it. Then, just to be safe, add a few more dollars to that amount and enter it as your maximum bid. If you do this, one of two things will happen -- either you will win the item, or you will be outbid. If you win, then you got a nice item at an amount you are willing to pay. And if you lose, then at least you know that whoever won was willing to pay more than you were [and probably more than the item is actually worth!]

One important note about snipers. There are some snipers who believe that winning is the most important thing, regardless of how much they end up having to pay for an item. They live for the adrenaline rush, and nothing makes them happier than to snatch an item away from a high bidder at the last second, just for the pleasure of it. These particular snipers [and fortunately they are still a rare breed] will actually bid far more than they actually want to pay for the item, in order to "guarantee" their victory. This is certainly not immoral or against the rules, as long as they actually follow through on their bids. But they bid this way knowing that most bidders don't enter high maximums, and that they will probably never have to really pay the full amount of their maximum bids. Unfortunately, there's really nothing that can be done to defend yourself from this type of sniper, since

they purposely make bids that no sane person would ever consider really paying for the item in question, on the assumption that they won't actually have to pay that much. The only thing you can do is to place a larger than average maximum bid of your own up front, and at least take comfort in knowing that the sniper ended up paying far too much for the thrill of beating you. If this happens enough times, maybe they'll stop doing it.

Remember that no matter how much a sniper's maximum bid is, the actual bid will only be one bid increment above your maximum bid. Many new users think that snipers have mystical powers and can somehow guess what the current high bidder's maximum is. Well, some snipers are good at guessing, which is why I always recommend that you pad your bid by a few dollars just in case [Again, it's also a good idea never to bid round numbers, since these are the easiest to guess. Instead of bidding $75, try bidding $77.77]. In most cases, though, the sniper is just bidding a high amount which they assume will outbid any reasonable bidder. The proxy system then simply places a bid for them one bid increment above your maximum.

What is a Reserve Auction? eBay™ allows sellers to list their items in two main ways, either with a simple minimum starting bid or with a minimum starting bid and a hidden reserve amount. The reserve amount is simply the least amount the seller wants to accept for an item, and if nobody bids that amount then neither the seller nor the high bidder is obligated to complete the transaction. It's as if no auction had occurred. Please keep in mind, by the way, that reserves are used in professional auction houses throughout the country and are specifically provided for by eBay. Some people may think that using a reserve is somehow sneaky or dishonest, but in reality it's just another way to run an auction.

Why Do Sellers Use Reserves? Sellers use reserves for a number of reasons. Most sellers who use reserves only do so with more expensive items, or items they themselves spent a lot of money on. Most sellers are trying to actually make a profit on the items they sell, and setting a reserve allows them to protect their investment and at least keep from losing money on the item in question. So why don't they simply set a minimum bid at the lowest price they want to sell for and forget using a reserve? Well, many sellers have discovered from experience a very odd fact about your average bidder - most bidders will simply not look at an item if it has a high minimum bid, but once they look and see how nice the item is, they may be willing to pay a little more than they had first thought.

Let's say, for example, that I am looking to buy a nice pocket watch for $100. If I see one listed for a minimum bid of $125, I'm going to just ignore it. If I see the same watch listed with a minimum bid of $29.99, however, I'm definitely going to check it out. As I read the description and look at the pictures, I may decide that it really is a nice watch after all, and I might be willing to bid as much as $125 on it. So, I place my bid. If my bid meets the reserve, I am immediately notified, and I know that I now have a chance of winning the item. If the reserve is not met, however, I am again immediately notified of this fact and I know that I can't afford the watch and should move on to the next item that catches my eye.

How Can Reserve Auctions Actually Help Me?

One of the advantages of reserve auctions for bidders is that they let you place a low bid without committing yourself. This is especially helpful if you are not 100% sure if you really want the item or how much you are willing to pay for it, but would still like to place a bid on it so it shows up on your "My eBay™" page. If an item only has a minimum bid with no reserve, you can only bid if you are sure that you want that item. With a reserve, however, you can place a bid at or near the minimum and then come back later if you decide you really want it. Note that the new "Watch this Item" feature that eBay™ now offers takes care of this problem to a certain degree, but many a tale has been told of bidders who have decided to "watch" an item and then completely forgotten to go back and bid on it later.

Another advantage of reserve auctions is that many [though certainly not all] sellers are willing to sell an item to the high bidder even if the reserve wasn't met, especially if the high bidder's maximum was close to the reserve price. Although most sellers try to set reasonable reserves which they honestly expect to be met, many are willing to settle for a little less if it means not having to relist the item and try again. If an item does not have a reserve and you don't want to bid the minimum amount, you are stuck. However, If you bid your maximum in a reserve auction and the reserve isn't met, you still might have a chance to negotiate with the seller after the auction is over. The seller is not obligated to negotiate with you, and quite often the reserve they set is as low as they are willing to go. But you'll find that many sellers are willing to negotiate, and you might end up with a much better deal than had the seller simply set a high minimum bid with no reserve.

How should I bid on Reserve Auctions? The important thing to remember with reserve auctions is that they are not guessing games. Some bidders get frustrated with reserves because they want to place as low a bid as possible, and they feel that the seller is making them "guess" what the lowest price possible is. This is simply not the case, however. As mentioned above, a bidder who tries to bid the absolute lowest amount possible is, in all likelihood, just going to get sniped at the last second. The seller doesn't want you to keep guessing until you hit the magic number. They simply want each bidder to bid what he or she feels the item is worth. Nothing more, nothing less. In fact, many sellers will tell any bidder who e-mails them what the reserve is. The theory is that any bidder who is interested enough to got to the trouble of sending an e-mail is probably interested enough to actually bid. Not all sellers are willing to reveal their reserve, of course, and some actually believe that they are not allowed to reveal it. However, if a seller won't reveal the reserve amount to you, you are free to move on to another item or go ahead and place your bid anyway, since the quickest and easiest way of discovering the reserve amount is to simply place your bid and see whether you meet the reserve.

That's pretty much it. Following these guidelines won't guarantee that you will win every auction that you bid on. But it will guarantee that you never pay more for an item than you really want to, and it will also guarantee that you'll have less frustration and more fun in the process.

So, what are you waiting for? Hit the "back" button on your browser and go have fun.